Do Foreign Investors’ Location Determinants in Service Functions Differ According to Sectors? An Empirical Analysis of EU for 1997 to 2011

European Union (EU) is very attractive for foreign direct investment (FDI) in services and policy makers should know the reasons explaining investment location choices of foreign firms in order to attract them. This article explores FDI location determinants in service functions in the EU-28. Studies dealing with such an issue stay generally focused on the location of service functions in the manufacturing sector. Our assumption is that the location determinants of service functions may differ according to sectors. So, we propose to study whether the location pattern of some service functions is sector independent, whereas it is sector dependent for other service functions. Using a database developed by Ernst and Young, we estimate mixed logit models on foreign firms’ location choices. Our contribution is to consider simultaneously three sectors and eight service functions for 271 European regions, during the period 1997 to 2011. Our fundamental findings are that service functions location choices are different according to sectors and that location determinants vary according to the service function considered. The only variables significant for all service functions are agglomeration variables. However, our contribution is to distinguish between different types of agglomeration (regional, sectorial, functional, and group agglomeration) and to show that some agglomeration variables act differently according to service functions.